Ross Beerman is the managing director of AllLife.
SUMMIT TV: What is the impact of Aids on society’s wellbeing? How has the insurance industry been impacted by Aids?
ROSS BEERMAN: The current economic environment has been difficult for all the players — distribution is down and there’s a whole lot of regulatory changes that the industry is focusing on. As the economy turns upwards the insurance should get a little stronger.
STV: If we look at industry dynamics, do you feel we have a genuine choice of benefit structures?
RB: South Africa is one of the most competitive insurance markets in the world, it’s the second most competitive insurance market in the world if you look at insurance products per capita. The most competitive is Switzerland and we are second and the USA third, so there is a truly competitive environment and pricing here is very good as a result of the competitive forces in the market. There is also great innovation, so you see things happening here that later spread to the rest of the world.
STV: Talking about innovation, exactly what are you pointing to?
RB: If I look at our example, we actively manage the health of our clients — we change their mortality and that allows us to provide life insurance to people living with HIV. That doesn’t happen anywhere else in the world and this comes out of the dynamics of the SA market so there’s a lot of very innovative players here. Companies like Discovery have managed to take the life insurance industry by storm and overseas as well.
STV: There’s been significant legislative and regulatory change in both the short-term and life insurance industries — how are smaller players like yourselves keeping up?
RB: The nice thing about regulatory changes in the environment is we’ve grown up with those — we were founded in 2004 and the Fais Act came into effect in 2005 — so our systems and processes have been built up around the regulatory environment as it exists today. The incumbents that have been around for a long time are dealing with legacy systems and distribution that was set up in a different era, so they’ve had to focus on dramatic changes that the regulations bring to the environment where it’s been business as usual for the smaller entrants.
STV: I came across a bit of news around solvency — what impact does this legislation have on the sector as a whole?
RB: That’s to do with how much capital the life companies have to hold against potential claims and operating risk — the amount of capital companies have to hold is going up and that will impact the cost at the end of the day to the consumer but will reduce risk and increase transparency. To avoid the shocks of the past, they’re making sure companies are robust and able to pay claims if required.
STV: Does this impact on your business model?
RB: No, we are reinsured by GenRe which is part of Berkshire Hathaway that’s owned by Warren Buffett and they have $180bn in capital, which stands behind our business so from their perspective, the solvency regulations don’t really have a dramatic impact as they have sufficient capital to stand behind our products.
STV: The first of December is World Aids Day — if we look at your business model, what changes have you made to accommodate the needs of HIV-positive individuals?
RB: We focus on HIV-positive people, so what happens is the traditional life insurance model says you apply for life insurance and you go for an HIV test and if you are found to be positive you are generally declined for that life cover. In our space it’s different in that what we do is we help our clients manage their health and that in turn increases their life expectancy and they want to live longer and we want them to live longer and we are able to offer them life insurance on the back of that. We are talking about real cover for individuals of up to R11m right down to R30,000 for an individual.
STV: How does this compare with your international counterparts?
RB: Because of the competitive nature of the SA market we are pretty good — when it comes to HIV, we are ahead of most other countries. We currently get applications from the USA and Europe and Asia from people who are living with HIV that can’t access life insurance. If you can’t access life insurance there is a dramatic knock-on effect so you can’t get a home loan because you can’t get insurance and you can’t start a business because you can’t access finance, and one tends not to take on long-term projects. If you are denied life cover you are denied the opportunity to participate in the general economy. Secondly it’s a terrible message because what the life company is telling you is they don’t expect you to live long enough for them to make a profit. That’s a terrible message to get when the reality is that we know if you do the right thing and manage your health you will live a very long life and you should be taking on long-term projects and be happy to buy a house and start a business and get educated. It’s a very different message when people come into our environment than when they enter other spaces. I’d say South Africa is ahead when it comes to product choices — everywhere else one is declined if one is HIV-positive where here in SA there are options.
STV: That’s interesting. Talking about the options that are available, just recently government awarded contracts for ARVs. How does that impact on costs and pricing?
RB: A big supplier of ARVs into the market is government, through their treatment programme, which is the biggest in the world. They recently concluded a tender that lowered costs by 50%, which will have a dramatic effect on their economics and extend the programme to more people and for a longer period of time and a low impact on the taxpayer and the fiscus.
STV: What is the impact of HIV/Aids on workplace performance and profitability?
RB: If we look at absenteeism in SA over the past 20 years, that’s gone up almost tenfold and that comes largely out of the impact of HIV on people’s health. So instead of going off for a day with the flu, one is off for three days, and instead of getting flu once a year one gets the flu twice a year. All those days add up, which means companies in SA are facing higher absenteeism rates than their competitors in the rest of the world. Also, if people are off work for a long time it’s about finding replacement so there’s a significant impact on productivity. There are companies that are doing unbelievable things to change that dynamic.